Things to check before going for foreign studies

Being an Indian student overseas is not easy in today's turbulent times. The rising cost of education, high interest rates on education loans, a weak rupee and a gloomy job market have forced many to revise their budgets.

"Earlier, overseas education was a dream nurtured and pursued by Indian students from various economic strata. Now, there is a feeling of the "luxury tag" being attached to overseas education. Fees in US and UK universities have risen in the range of $500-1,000 and £500-1,000.

This is because of the rising education fees as well as the weakening of the rupee," said Neha Rachh, senior counsellor at Apex Consultants. "The rupee's depreciation has resulted in cost of overseas education going up for Indian students. Consequently, the average ticket size of loans has gone up by 25-30%," says Prashant Bhonsle, country head, Credila Financial Services, an HDFC subsidiary dealing with education loans.

"Earlier, many students preferred not to call for the additional tranches of funds after the first semester as they gained access to part-time employment or some other form of financial aid. Now, students are availing of funds to finance their subsequent semesters, too." Sadly, suitable jobs are also hard to come by - both in India and abroad - putting a question mark on timely repayments.

The Rupee Impact

An MBA course that cost around Rs 46 lakh in December 2011, now costs over Rs 47 lakh due to the depreciation of the rupee. Obviously, you need to redraw your budget. As for those who are about to pay the course fee, try to time the foreign exchange market a bit to save some money.

"If you are yet to pay your fees, don't be in a hurry. Keep the funds ready in hand. We advise our students to track the currency market. If the rupee recovers even a bit on a particular day, the student can pay the fees then. We have seen students save up to Rs 25,000 just by paying on a day when the rupee recovered from its previous lows as against the dollar," says Neha Rachh of Apex Consultants. In contrast, student borrowers who are earning in dollars after the completion of the course may be smiling their way to the bank as the depreciating rupee lowers the repayment amount.

Funding your education

"Ideally, you should have a clear idea about your budget and affordability before short-listing the universities. Based on your or your parents' savings, you will know your financial requirement, which could be raised either by an education loan or financial aid," points out Suchitra Surve, director at Growth Centre India, an education counselling centre.

"But, if you have a relative who can partly sponsor your study, it can reduce your overall loan burden. Universities allow students to opt for two to three family sponsors. Once you get a job, you can pay off the dues to your family members," adds Rachh. This will also help eliminate exchange rate uncertainties as you would be borrowing from them in dollars.

It is also possible that you may find the course fee to be unsustainable when you are half way through the programme. Even if you have not been the recipient of financial aid in the first semester, you can always re-apply in the second semester. "You can meet the financial aid officer and understand why your application was not considered for financial aid.

Based on the feedback, you can take up academic jobs such as research assistant, teaching assistant and file for a waiver of amount. You can also work towards consistent scores, which will increase the chances of getting a financial aid," says Surve. "US universities work on the credit system. So a student has the option of finishing his course on an earlier date or even postponing the same. You can advance the finishing date if you have completed all the credits," adds Surve.

Taking care of Repayment

Most Indian public sector banks offer loans of up to Rs 20 lakh for funding overseas education, which could still fall short of your requirements. However, these banks do raise the cap on a case-to-case basis. Most private players, like Credila, do not have any upper limit on these loans.

Remember that interest rates are linked to the base rate or prime lending rates, and it means that the total repayment amount could fluctuate. For instance, students who have availed of loans a year ago, have seen the rates shoot up by up to 75-100 basis points. You can try to ease the burden during the course period by taking up part-time employment if possible.

Also, servicing the interest component during the course period could earn you discounts of up to 1% from some banks. "A student who is already studying abroad can take up a job. He can even opt for academic jobs such as teacher's or research assistant's. Students can earn some stipend to manage their living expenses.

This will take some pressure off the parents who remit money to Indian students for their living expenses. Instead, the parents can focus on paying the interest component of the loan. This will bring down the overall loan burden," advises Rachh.

Finally, be a little more realistic when it comes to deal with the current employment scenario. "If you have taken a loan to study abroad, repayment should be the top most priority. You can always gain some work experience and use that to get a better job when the economy improves. Getting a job profile and remuneration of your choice is highly desired, but it pays to be practical in such times," says Rachh.